COMPANY NOTES
By CUSTOS • RETURNING to the Stock Exchange on Tuesday brokers found several • surprises awaiting them. Dollar shares had suffered from a short, sharp attack of stomach indigestion, the recovery in gold shares had survived the weekend, and SHELL—the greatest of all equities—had jumped 10s. on American buying. As I recommended Shell at 146s. 3d. on December 28 as one of my New Year selections, I am naturally delighted to see them at 212s. 6d.—the bearer being 220s. The cause of the American buying was th`e switching recommended by many Wall Street brokers from domestic to international oil shares. 1 was also glad to sec some improvement in the gilt-edged market. There must be hope for Government stocks if a revival in gold shares can really be held. According to theindex they have lost two- thirds of their value since the end of the war and in spite of the fact that developments in the new mines of the Orange Free State have been right up to expectations and yields of over 9 per cent. can be obtained from some first-class mines with very long lives, like President Brand and President Steyn, it has been impossible, up till last week, to attract more buyers than sellers. The fundamen- tal objection to South African gold mines as investments is, first, that costs are rising but the price of gold is fixed; secondly, that the Govern- ment pursues an impossible apartheid policy which in the end will lead to either an economic decline or a political explosion. What brought a change in the market trend was the buying from Paris. Another factor was the news of a rich strike in the new area now being opened up in the St. Helena mine. This caused a rise of 7s. to 30s. in ST. HELENA and brought in buyers of the shares of the parent company, UNION CORPORATION, which have risen 6s. to 41s. to yield 7.3 per cent. on last year's dividend of 3s. I would leave this market to the professionals.
The news that the Tilling group have acquired the company which holds the UK concession of the German Volkswagen cars reminds me that the investor is not over-enamoured of the industrial holding company. However wide and excellent the spread there is always one industry not doing so well as the others and pulling back the advance in profits. THOMAS TILLING at 54s. 3d. to yield 4.15 per cent. on the 11+ per cent. dividend (covered 2.7 times) seems fully valued for the time being. SEARS HOLDING 5s. 'A' at 15s. 6d. yield 7+ per cent, on the 22-A sper cent. dividend (covered twice). Here shipbuilding, engineering, motor trading and electronics arc thrown in (with boots and shoes). Although no hint was given at the meeting the market is going for a modest rise in the dividend. In Sears the investor is backing Mr. Clore; in Tilling Mr. Fraser. The disparity in yields does not necessarily mean that the market is underrating Mr. Clore or overrating Mr. Fraser : it is just able to digest better the shares of Mr. Fraser; Mr. Clore not being so 'old established.'
METAL BOX used to be one of my first six `growth' equities, but last year I considered that it was advisable to exclude it from the list for the time being. This was because I learned that American Can was making competition hotter by supplying a Liverpool firm, Read, with machinery to enable it to enter food canning. The trading results of Metal Box for the year to March last . show that while total sales increased by 12 per cent., total profits were slightly down (overseas profits were slightly up but home down by nearly 5 per cent.). Profit margins have been falling quietly but steadily over the past two years. The ratio of gross profits to sales in the home market fell to 6.7 per cent, for the last six months as com- pared with 8.3 per cent. in the corresponding period a year ago. The company raised £6 million last March for expansion, particularly overseas, where the profit margins are greater, and this in time should improve the equity earnings which last year amounted to 331 per cent. The dividend was raised by 1 per cent. to II per cent, and at 56s. the shares yield under 4 per cent. In my opinion Metal Box is not such an attractive share for the 'growth' list for the moment.
The shareholders of BRITISH CELANESE should sigh with relief that the merger with COURTAULDS is now an accomplished fact. The report of the latter for the year ending March, in which net profits fell by nearly 17 per cent., was realistic without being depressing. Prospects for the cur- rent year have been improved by the recovery in the motor trade—last year the rising costs of tyre yarn production were not passed on to the con- sumer—and by the increase in textile yarn prices in January. On its old equity capital Courtaulds earned 281 per cent. last year and paid 10 per cent. Including the Celanese capital and profits a 10 per cent, dividend should be maintained with an earnings cover of about 2+ times. At 35s, 3d.
ex dividend to yield a potential 5.7 per cent. Courtaulds might be held, but I would wait for it fall before buying afresh.
For an industrial share which still offers a 5 per cent, yield with prospects of considerable 'growth' I would call attention to DUB1LIER CON- DENSER. This company's mainstay lies in its universally used condensers and transistors in the electronic industry: it is now developing new business in the nucleonic and atomic fields. At 6s. the 1s. shares yield 5 per cent. on their 30 per cent, dividend which was covered in the year to March, 1956, over 4-I times. The results for the year to March, 1957, will be announced in a month's time.
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